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Zero to One

Author: Peter Thiel

Preface

  • Every moment in business happens once
  • Copying easier than creating
    • Goes from 1 to n
    • Creating is 0 to 1
  • Thinking about business from first principles instead of formulas
  • All new invention processes unique

  1. The Challenge of the Future

    1. Interview question: what important truth do very few ppl agree with you on?
    2. Most people believe in x but the truth is the opposite of x
    3. Good ways of looking into a future different from but rooted in today
    4. 1 to n horizontal progress is globalization
    5. 0 to 1 vertical progress is technology
      1. Technology is any new better way of doing anything
    6. Startup thinking
      1. Startup is the largest group of people you can convince of a plan to build a different future.
        1. Need other people to get stuff done but small enough so you actually can
      2. Big organization have a hard time developing new things.  Even harder to do it by yourself.  
        1. Entrenched interests shy away from risk
        2. Bureaucratic hierarchies move slowly
          1. In some dysfunctional organizations signaling work being done is a better strategy than actually doing work.
        3. Lone genius can create beautiful art or novels but not an entire industry
      3. To Build from scratch is to rethink business from scratch.

  2. Party Like it’s 1999

    1. Identify a delusional popular myth
    2. Will lead to contrarian truth
    3. Lessons learned from 90s bubble
      1. Small incremental steps not one big grandiose goal
      2. Stay lean and unplanned and treat entrepreneurship as agnostic experimentation
      3. Improve on the competition
        1. Don’t try to create a new MarkEt; find an existing customer for an existing product to improve on
      4. Focus on profit not sales
        1. Technology is about product development not distribution
        2. Only viral growth
    4. But likely the opposites of these lessons is the contrarian truth
    5. How much of current business thinking shaped by reactions to past?
    6. Contrarian is not opposing the crowd but thinking for yourself

  3. All Happy Companies are Different

    1. What valuable company is nobody building?
    2. Creating value without a valuable company
    3. Big businesses can be bad businesses
    4. Google creates less value but captures more
    5. Monopoly vs perfect competition
    6. So good at what it does that no other company can compete
    7. Capitalism and competition are opposites
    8. Don’t build a commodity business
    9. Both types tell lies to hide true state
    10. Don’t focus on trivial differentiating factor
    11. Ruthless fight for profits in competition
    12. Money is either an important thing or everything
    13. Monopoly allows business to think of other issues
    14. Monopolies drive progress because gives big incentive to innovate and invest in research

  4. The Ideology of Competition

    1. School competition for conformity
    2. Cutthroat culture of school
    3. War metaphors in school and business
    4. Competition is what is like war
    5. Combatants more similar to each other than different
    6. Google and Microsoft rivalry allowed apple to swoop in and win
    7. Is the war one worth fighting about
    8. When rivalry too intense, might be better to merge

  5. Last Mover Advantage

    1. Can’t just focus on near term growth
    2. Right Question is will this business be around a decade from now
    3. Characteristics of monopoly
      1. Proprietary technology
        1. Must be 10X better than closest substitute on some important dimension
        2. Best way is to invent something new
        3. Superior integrated design
      2. Network effects
        1. Must initially start with small market to saturate it
      3. Economies of scale
        1. Harder for service businesses
      4. Branding
    4. Start with small market and monopolize
    5. Small group of ppl close together served by little or no competition
    6. First dominate specific niche then scale to adjacent markets
    7. Don’t disrupt existing market
    8. Avoid competition where possible
    9. Invent new unserved market
    10. Be the last mover to get advantage and enjoy sustainable profits for long term not first experimenter
    11. Study the end game first

  6. You’re not a lottery ticket

    1. Make your own luck by working hard
    2. Believe in cause and effect not luck
    3. Expect a definite future which you can shape not a hazy indefinite uncertain one
    4. Favor firm convictions not many sided mediocrity and well rounded ness
    5. Just determine one best thing to do and do it
    6. 4 views
      1. Indefinite pessimist (europe)
      2. Definite pessimism (china)
      3. Definite optimism (led western world; 19th century business classes); bold plans for future
      4. Indefinite optimism (dominated in last 30 years); rearranging existing products; finance growth; consultants squeezing out efficiencies; keeping options open
    7. Indefinite optimism future incentivizes financiers bankers and lawyers
    8. No one knows what to do with actual money nowadays
    9. Indefinite politics: real time tailoring of electoral image to what ppl want now instead of in 10 years
    10. Indefinite logic of entitlement spending
    11. Indefinite philosophy: little concrete ideas; arguing over process to defer making definite plans for future
    12. Indefinite life; previously scientists searched to cure death; now death just probability tables; accepted idea that death inevitable and random; biotech following inverse of moore’s law and struggling in its random search
    13. Prioritize design over chance
    14. Changing the world through careful planning, not listening to focus group feedback
    15. Lean startup is a methodology not the goal

  7. Follow the Money

    1. Power of compound interest and exponential growth
    2. Pareto principal: 80/20
    3. 20% get 80% of something
    4. We don’t live in a normal world; we live under a power law
    5. Vc is not about diversification across many companies; it’s about dogged pursuit of only the best who will dominate

  8. Secrets

    1. What secrets does the world still have yet to give up
    2. Need to believe in secrets to work extremely hard to find them
    3. Secrets of nature and secrets about people
    4. What secrets is nature not telling you?
    5. What secrets are people not telling you?
    6. What are ppl not allowed to talk about? What is taboo?

  9. Foundations

    1. Decisions made early on impact everything and extremely hard to change
    2. Ownership possession and control
    3. Board of 3. No more than 5 unless forced.  Always keep to absolute minimum.
    4. Everyone involved should be full time and on site
    5. Company does better the less it should pay the CEO
    6. CEO should take the lowest salary in the company
      1. CEO leads.  That means everyone will work harder or less depending on their output.  Their behavior is also adapted and willingness to cooperate.
    7. Cash always more about present than future
    8. Equity orients ppl right
    9. Equal shares wrong

  10. The Mechanics of Mafia

    1. Hire ppl who really enjoy working together
    2. Never outsource recruiting
    3. Why someone should join should always be specific to your company: mission and team
    4. Why you’re unique
    5. Have early staff be similar to each other so share mission and goals
    6. Need early hires to all be obsessed with same things
    7. Do one thing
    8. Every employee responsible and evaluated on just one thing specific to them
    9. See your work either as a cult or as a consultant

  11. If you build it will they come

    1. Sales is about persuasion and is hard to make it look easy
    2. Just as important as engineering
    3. Sales works best when hidden
    4. Like actor or magician
    5. Distribution as fundamental part of design of product
    6. Customer lifetime value must exceed customer acquisition cost
    7. TV ads work and are like megaphone
    8. Viral marketing
      1. Viral product is best.  Paypal markets itself when used.  User is motivated to share with friends.  Trading of money from one user to a friend with paypal.  Sharing article with one friend to another in Facebook.
    9. Power law of distribution channels
    10. Selling to non customers: must also sell to employees and investors and media; need pr strategy

  12. Men and Machine

    1. Computers empower ppl not replace them (average is over!)
    2. Tools not rivals
      1. Doesn’t fight over the same resources.  Symbiotic relationship.  The best company is a cybernetic one, not AI or old fashioned.
    3. Technology way to escape competition
    4. “The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete”

  13. Seeing Green

    1. 7 questions every business Must answer
      1. The engineering question: can you build it
      2. The timing question: is now the right time to build it
      3. The monopoly question: are you starting with a big share of a small market
      4. People: do you have the right team
      5. Distribution: do you have the right way to deliver the product
      6. Durability: will market position be defensible 10-20 years into the future
      7. Secret: have you identified a unique opportunity others don’t see
    2. Clean tech failed to have answers to all of theses questions
    3. Recognizing future competition strategies to destroy or react to your business.
    4. “The best projects are likely to be overlooked, not trumpeted by a crowd; the best problems to work on are often the ones nobody else even tries to solve.”

  14. The Founders Paradox

    1. Extremism of founder traits
    2. Insider outsider
    3. Famous people are now the modern day royalty.  Tech

  15. Conclusion: Stagnation or Singularity

    1. Think for yourself

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